exe10_1.htm


    
 

     

    
      

      

    

    
 

    Exhibit
10.1

     

    EMPLOYMENT
AGREEMENT

     

    THIS EMPLOYMENT AGREEMENT
(this “Agreement”)
by and between William L. Ottaviani (the “Executive”)
and Rex Energy Operating Corp., a Delaware corporation (the “Company”),
is made and entered into this 1st day of August, 2008 (the “Effective
Date”).

     

    W I T N E S S E T
H

     

    WHEREAS, the Executive has
been rendering services to the Company and its affiliates under an Employment
Agreement by and between the Executive and the Company dated as of August 8,
2007, but effective September 4, 2007  (the “Superseded
Agreement”);

     

    WHEREAS, the Company provides
management and administrative services to its parent, Rex Energy Corporation
(“Rex”) and
Rex’s subsidiaries;

     

    WHEREAS, the Executive has
been appointed as the Executive Vice President and Chief Operating Officer of
Rex by its Board of Directors (the “Board”);

     

    WHEREAS, the Executive and the
Company desire to make certain revisions and amendments to the Superseded
Agreement as herein provided and;

     

    WHEREAS, the Executive is
willing to commit himself to continue to serve the Company and Rex, on the terms
and conditions herein provided;

     

    WHEREAS, the Company and the
Executive desire to set forth in this Agreement the terms and conditions of the
Executive’s continued employment; and

     

    NOW, THEREFORE, in
consideration of the premises and the respective covenants and agreements of the
parties herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:

     

    1. Employment and
Term.

     

    (a) Effective
as of the Effective Date, except with respect to Sections 9(a) and 14 of the
Superseded Agreement, which shall remain in effect under this Agreement, the
Superseded Agreement is hereby superseded by this Agreement, and Executive shall
have no further rights, and the Company or Rex shall have no further
liabilities, under the Superseded Agreement.

     

    (b) The
Company hereby agrees to continue to employ the Executive, and the Executive
hereby accepts the continued employment, on the terms and conditions hereinafter
set forth. The period of employment of the Executive by the Company hereunder
(the “Employment Period”)
shall commence on the Effective Date and shall end on the Executive’s Date of
Termination (as defined in Section 7(b) hereof).  The term of
this Agreement (the “Term”)
shall begin on the Effective Date and shall end on the third (3rd)
anniversary thereof; provided, that, on third
anniversary date of the Effective Date and each anniversary of such date
thereafter, the Term shall be extended for one (1) additional
year unless, prior
to the date which
is sixty (60) days prior to third anniversary date (with respect to the
extension on the third anniversary date) and each 

     

    
      
        
        

      

      
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anniversary of such date thereafter (with respect to each subsequent annual
extension), the Company or the Executive shall have given written notice not to
extend the Term
              
the Executive shall have incurred a termination of employment with the
Company.

    

     

    2. Position and
Duties.

     

    (a) As of the
Effective Date, the Executive shall serve as the Executive Vice President and
Chief Operating Officer of the Company and Rex, in which capacity the Executive
shall perform the usual and customary duties of such office, which are normally
inherent in such capacity in U.S. publicly held corporations of similar size and
character as Rex. The Executive shall report to the President and Chief
Executive Officer of the Company and Rex.  The Executive agrees and
acknowledges that, in connection with his employment relationship with the
Company and Rex, the Executive owes fiduciary duties to the Company and Rex and
will act accordingly.

     

    (b) During
the Employment Period, the Executive agrees to devote substantially his full
time, attention and energies to the Company’s and Rex’s business and agrees to
faithfully and diligently endeavor to the best of his ability to further the
best interests of the Company, Rex and its stockholders.  The
Executive shall not engage in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage.  Subject to the covenants of Section 9 herein, this
shall not be construed as preventing the Executive from investing his own assets
in such form or manner as will not require his services in the daily operations
of the affairs of the companies in which such investments are made. Further,
subject to Section 9 herein, the Executive may serve as a director of other
companies, if such service is approved by the Compensation Committee (the “Compensation
Committee”) of the Board, so long as such service is not detrimental to
the Company or Rex, does not interfere with the Executive’s service to the
Company and Rex and does not present the Executive with a conflict of
interest.

     

    (c) In
keeping with the Executive’s fiduciary duties to the Company and Rex, the
Executive agrees that he shall not, directly or indirectly, become involved in
any conflict of interest, or upon discovery thereof, allow such a conflict to
continue.  Moreover, the Executive agrees that he shall promptly
disclose to the Board any facts which might involve any reasonable possibility
of a conflict of interest, or be perceived as such.

     

    (d) Circumstances
in which a conflict of interest on the part of the Executive would or might
arise, and which should be reported immediately by the Executive to the Board,
include the following: (i) ownership of a material interest in, acting in
any capacity for, or accepting directly or indirectly any payments, services or
loans from a supplier, contractor, subcontractor, customer or other entity with
which the Company or Rex does business; (ii) misuse of information or
facilities to which the Executive has access in a manner which will be
detrimental to the Company’s or Rex’s interest; (iii) disclosure or other
misuse of Confidential Information (as defined in Section 9); 

    
       

      
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      (iv) acquiring
or trading in, directly or indirectly, other properties or interests connected
with the design, manufacture or marketing of products designed, manufactured or
marketed by the Company or Rex; (v) the appropriation to the Executive or
the diversion to others, directly or indirectly, of any opportunity in which it
is known or could reasonably be anticipated that the Company or Rex would be
interested; and (vi) the ownership, directly or indirectly, of a material
interest in an enterprise in competition with the Company or Rex or their
dealers and distributors or acting as a director, officer, partner, consultant,
employee or agent of any enterprise which is in competition with the Company or
Rex or its dealers or distributors.

    

     

    (e) Further,
the Executive covenants, warrants and represents that he shall:

     

    (i) devote
his full and best efforts to the fulfillment of his employment
obligations;

     

    (ii) exercise
the highest degree of fiduciary loyalty and care and the highest standards and
conduct in the performance of his duties; and

     

    (iii) endeavor
to prevent any harm, in any way, to the business or reputation of the Company,
Rex or their subsidiaries.

     

    3. Place of
Performance.  In connection with the Executive’s employment by
the Company and Rex, the Executive’s principal business address shall be at the
Company’s principal executive offices in State College, Pennsylvania (the “Principal Place
of Employment”).  Executive hereby agrees to perform a
substantial amount of his duties at the Principal Place of Employment, but the
Executive understands and agrees that he will be required to travel from time to
time for business purposes.

     

    4. Compensation and Related
Matters.

     

    (a) Base
Salary.  During the Employment Period, the Company shall pay
the Executive an annual base salary (“Base
Salary”) in an amount that shall be established from time to time by the
Compensation Committee, payable in approximately equal installments in
accordance with the Company’s customary payroll practices.  The Base
Salary shall be set initially at $195,000.  The Compensation Committee
shall review the Executive’s Base Salary at least annually thereafter during the
Employment Period.  The Executive’s Base Salary may be increased but
not decreased during the Employment Period.

     

    (b) Bonuses.   During
the Employment Period, the Executive shall be eligible to participate in the
annual incentive compensation plan for executives established and adopted by Rex
and the Company, or any successor plan or plans, if any, thereto (the “Annual Incentive
Plan”).  The bonus opportunity afforded the Executive pursuant
under the Annual Incentive Plan may vary from year to year and any bonus earned
thereunder, if any, (the “Annual
Bonus”) shall be paid at a time and in a manner consistent with the
Company’s customary practices. The Executive’s bonus levels established under
the Annual Incentive Plan will be contingent upon Rex achieving predetermined
performance goals and approval by the Compensation Committee.

     

    
      
        
        

      

      
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    (c) Equity-Based Compensation and
Performance Awards.  During the Employment Period, subject to
an assessment of the Executive’s performance and individual levels of
achievement by the Chief Executive Officer of Rex and subject further to the
approval of the Compensation Committee or the Board, as the case may be, the
Executive shall be eligible to receive equity-based compensation awards and
performance awards on substantially similar terms and conditions no less
favorable than awards made to other senior executive officers of the
Company.

     

    (d) Expenses.  The
Company shall promptly reimburse the Executive for all reasonable business
expenses incurred during the Employment Period by the Executive in performing
services hereunder, including all expenses of travel and living expenses while
away from home on business or at the request of and in the service of the
Company; provided, in each case, that such expenses are incurred and accounted
for in accordance with the policies and procedures established by the
Company.

     

    (e) Other
Benefits.  During the Employment Period, the Executive shall be
entitled to participate in all of the employee benefit plans and arrangements
made available by the Company to its other senior executive officers, subject to
and on a basis consistent with the terms, conditions and overall administration
of such plans and arrangements, and shall be entitled to perquisites that may be
added with the approval of the Compensation
Committee.  Notwithstanding the foregoing, the Company shall have the
right to change, amend or discontinue any benefit plan, program, or perquisite,
so long as such changes are similarly applicable to senior executive officers of
the Company generally.   The Executive shall also be entitled to
a monthly vehicle allowance in the amount of $500.00 per month payable in
accordance with the Company’s normal payroll practices.

     

    (f) Paid Time Of
Benefits.  During the Employment Period, the Executive shall be
entitled to Paid Time Off benefits in accordance with and subject to the terms
and conditions of the Company’s Paid Time Off Policy, as such policy may be in
effect from time to time.   For purposes of the calculation of
the Executive’s entitlement to Paid Time Off only, the Executive will be
credited with seven (7) years of service to the Company (as of September 4,
2007).  The Executive will also be entitled to any paid holidays
offered to employees of the Company when and as established by the
Company.

     

    (g) Services
Furnished.  During the Employment Period, the Executive shall
at all times be provided with office space, stenographic assistance and such
other facilities and services as are suitable to his position and no less
favorable than those being provided to the Executive by the Company as of the
date hereof.

     

    5. Offices.  Subject
to Sections 2, 3 and 4 hereof, the Executive agrees to serve without
additional compensation, if elected or appointed thereto, as a director of any
of Rex’s  or the Company’s subsidiaries and as a member of any
committees of the board of directors of any such subsidiaries, and in one or
more executive positions of Rex or any of Rex’s or the Company’s subsidiaries;
provided, that the Executive is indemnified for serving in any and all such
capacities on a basis no less favorable than is currently or may be provided to
any other director of the Company, Rex or any of their subsidiaries, or in
connection with any such 

     

    
      
        
        

      

      
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      executive
position, as the case may be.  This indemnity is in addition to and
not in replacement of the Company’s obligations to provide indemnity pursuant to
Section 11 hereof.

    

     

    6. Termination.  The
Employment Period shall end in the event of a termination of the Executive’s
employment in accordance with any of the provisions of Section 6 or 7, and
the Term shall expire in the event of a termination of Executive’s employment by
the Company or Rex for Cause or by the Executive without Good Reason, in each
case, on the Executive’s Date of Termination.  Otherwise the Term
shall expire as set forth in Section 1.

     

    (a) Death.  The
Executive’s employment hereunder shall terminate upon his death.

     

    (b) Disability.  If, as
a result of the Executive’s incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of his duties
hereunder for the entire period of ninety (90) days in the aggregate during any
period of twelve (12) consecutive months or it is reasonably expected that such
disability will exist for more than such period of time, and within thirty (30)
days after written Notice of Termination (as defined in Section 7) is given
(which notice may be given during such ninety (90) day period) shall not have
returned to the performance of his duties hereunder on a full-time basis, the
Company or Rex may terminate the Executive’s employment hereunder for “Disability.”

     

    During
any period that the Executive fails to perform his duties hereunder as a result
of incapacity due to physical or mental illness (“Disability
Period”), the Executive shall continue to receive his Base Salary at the
rate in effect at the beginning of such period as well as all other payments and
benefits set forth in Section 4 hereof, reduced by any payments made to the
Executive during the Disability Period under the disability benefit plans of the
Company then in effect or under the Social Security disability insurance
program.

     

    (c) Cause.  The Company
or Rex may terminate the Executive’s employment hereunder for
Cause.  For purposes of this Agreement, “Cause”
means conduct, activities or performance by the Executive which, in the good
faith determination of the Company, Rex (or their successors), based upon the
information then in its possession, is detrimental to its interests, business,
goodwill or reputation.  Both the Executive and the Company recognize
that it is not possible to describe every circumstance in which “Cause” would
exist.  By way of illustration only, the Executive and the Company
agree that “Cause”
includes, but is not limited to:  excessive absenteeism; failure or
refusal to perform the duties or obligations of the Executive under this
Agreement; insubordination; theft or abuse of the property or the property of
the Company, Rex or their affiliates, parents, subsidiaries, customers,
employees, contractors or business associates; dishonesty; working while
intoxicated; violation of the Company’s or Rex’s rules, policies, procedures or
practices; abuse of benefits or privileges of employment; unprofessional conduct
toward or unlawful discrimination against the Company’s or Rex’s employees,
customers, business associates, contractors or visitors; and any unauthorized
conduct which creates a risk or loss or liability to the Company or Rex or
damaging their reputations or interests.   Furthermore, for
purposes of this Agreement, 

     

    
      
        
        

      

      
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      the Rex
or the Company shall have “Cause” to terminate the
Executive’s employment hereunder upon the occurrence of any of the following
events:

       

      (i) the
Executive is convicted of an act of fraud, embezzlement, theft or other criminal
act constituting a felony;

       

      (ii) a
material breach by the Executive of any material provision of this
Agreement;

       

      (iii) the
failure by the Executive to perform any and all covenants contained in
Sections 2(c), 2(d), 2(e) and 9 of this Agreement for any reason other than
the Executive’s death, Disability or following the Executive’s delivery of a
Notice of Termination for Good Reason; or

       

      (iv) a
material breach by the Executive of the Company’s or Rex’s Code of Business
Conduct and Ethics;

       

      provided,
that, the Executive shall have thirty (30) days from the date on which the
Executive receives Rex’s or the Company’s Notice of Termination for Cause under
clause (ii), (iii) or (iv) above to remedy any such occurrence otherwise
constituting Cause under such clause (ii), (iii) or (iv).

       

      (d) Good Reason.  The
Executive may terminate his employment hereunder for “Good
Reason”.  Good Reason for
the Executive’s termination of employment shall mean the occurrence, without the
Executive’s prior written consent, of any one or more of the
following:

       

      (i) the
assignment to the Executive on a permanent basis of a material amount of duties
which are inconsistent with the Executive’s position, authorities, duties or
other responsibilities as contemplated by Section 2 of this Agreement;
provided, however that
the Executive acknowledges and agrees that a change solely in office or title of
the Executive, by itself, shall not automatically constitute grounds for
termination for Good Reason;

       

      (ii) the
relocation of the Principal Place of Employment to a location more than twenty
five (25) miles from the Principal Place of  Employment;
or

       

      (iii) a
material breach by the Company of any material provision of this
Agreement;

       

      provided,
in any case, that the Company shall have thirty (30) days from the date on which
the Company receives the Executive’s Notice of Termination for Good Reason to
remedy any such occurrence otherwise constituting Good Reason.

      
If one or
more Changes in Control of the Company (as hereinafter defined) occurs prior to
the termination of this Agreement, Good Reason for the Executive’s termination
of employment shall, in addition to the events
listed



    
      
        
        

      

      
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    above,
also mean the occurrence, without the Executive’s prior written consent, of any
one or more of the following:

     

    (i) the
Company, Rex or either of their successors, as the case may be, reduces the
Executive’s Base Salary as in effect immediately before the occurrence of the
first Change in Control of the Company or as the Executive’s Base Salary may be
increased from time to time after that occurrence;

     

    (ii) the
Company, Rex or either of their successors, as the case may be, reduces the
Annual Bonus opportunity afforded the Executive to an amount less than the
Annual Bonus opportunity afforded the Executive under the Annual Incentive Plan
as in effect immediately before the occurrence of the first Change in Control of
the Company;

     

    (iii) the
Company, Rex or either of their successors, as the case may be,  fails
to (x) continue in effect any bonus, incentive, profit sharing, performance,
savings, retirement or pension policy, plan, program or arrangement (such
policies, plans, programs and arrangements collectively being referred to herein
as “Basic Benefit Plans”), including, but not limited to, any deferred
compensation, supplemental executive retirement or other retirement income,
stock option, stock purchase, stock appreciation, or similar policy, plan,
program or arrangement of the Company or Rex, in which the Executive was a
participant immediately before the occurrence of the first Change in Control of
the Company, or any substitute plan adopted by the Board of Directors and in
which the Executive was a participant immediately before the occurrence of the
last Change in Control of the Company, unless an equitable and reasonably
comparable arrangement (embodied in a substitute or alternative benefit or plan)
shall have been made with respect to such Basic Benefit Plan promptly following
the occurrence of the last Change in Control of the Company, or (y) continue the
Executive’s participation in any Basic Benefit Plan (or any substitute or
alternative plan) on substantially the same basis, both in terms of the amount
of benefits provided to the Executive (which are in any event always subject to
the terms of any applicable Basic Benefit Plan) and the level of the Executive’s
participation relative to other participants, as existed immediately before the
occurrence of the first Change in Control of the Company;

     

    (iv) the
Company, Rex or either of their successors, as the case may be, fails to
continue to provide the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company’s or Rex’s other executive
benefit plans, policies, programs and arrangements, including, but not limited
to, life insurance, medical, dental, health, hospital, accident or disability
plans, in which the Executive was a participant immediately before the
occurrence of the first Change in Control of the Company;

     

    (v) the
Company, Rex or either of their successors, as the case may be, takes any action
that would directly or indirectly materially reduce any other non-contractual
benefits that were provided to the Executive by the Company 

     

    
      
        
        

      

      
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      immediately
before the occurrence of the first Change in Control of the Company or deprive
the Executive of any material fringe benefit enjoyed by the Executive
immediately before the occurrence of the first Change in Control of the
Company;

    

     

    (vi) the
Company, Rex or either of their successors, as the case may be, fails to provide
the Executive with the number of hours of Paid Time Off (or a reasonably
comparable equivalent) to which the Executive was entitled in accordance with
the Company’s Paid Time Off in effect immediately before the occurrence of the
first Change in Control of the Company;

     

    (vii) the
Company, Rex or either of their successors, as the case may be, requires the
Executive to perform a majority of his duties outside the Executive’s principal
office for a period of more than 21 consecutive days or for more than 90 days in
any calendar year;

     

    (viii) the
Company, Rex or either of their successors, as the case may be, fails to honor
any provision of any agreement the Executive has or may in the future have with
the Company or Rex or fails to honor any provision of this
Agreement;

     

    (ix) the
Company, Rex or either of their successors, as the case may be, gives effective
notice of an election to terminate at the end of the term or the extended term
of any employment agreement Executive has or may in the future have with the
Company, Rex or the successor in accordance with the terms of any such
agreement; or

     

    (x) the
Company, Rex or either of their successors, as the case may be, purports to
terminate the Executive’s employment by the Company unless notice of that
termination shall have been given to the Executive pursuant to, and that notice
shall meet the requirements of, Section 7(a);

     

    provided,
in any case, that the Company or its successor shall have thirty (30) business
days from the date on which the Company or its successor receives the
Executive’s Notice of Termination for Good Reason to remedy any such occurrence
otherwise constituting Good Reason.

     

    (e) Termination of
Agreement.  Either party hereto may terminate this Agreement at
any time by giving the Company or the Executive, as the case may be, no more
than thirty (30) days’ prior written notice, in accordance with Section 7
hereof, of such party’s intent to so terminate this Agreement.

     

    7. Termination
Procedure.

     

    (a) Notice of
Termination.  Any termination of the Executive’s employment by
the Company or Rex or by the Executive (other than termination pursuant to
Section 6(a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 12
hereof.  For purposes of this Agreement, a “Notice
of Termination”
shall mean a notice that shall indicate the specific termination 

     

    
      
        
        

      

      
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      provision
in this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.

    

     

    (b) Date of
Termination.  “Date of
Termination” shall mean (i) if the Executive’s employment is
terminated pursuant to Section 6(a) above, the date of the Executive’s
death, (ii) if the Executive’s employment is terminated pursuant to
Section 6(b) above, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), (iii) if
the Executive’s employment is terminated pursuant to Section 6(c) above,
the date specified in the Notice of Termination, which date may be no earlier
than the date the Executive is given notice in accordance with Section 12
hereof, (iv) if the Executive’s employment is terminated pursuant to
Section 6(d) above, the date specified in the Notice of Termination, which
date shall not be later than thirty (30) days following the date on which the
Notice of Termination is given and (v) if the Executive’s employment is
terminated for any other reason, the date specified in the Notice of
Termination, which date shall be not later than thirty (30) days following the
date on which Notice of Termination is given; provided, that, if within ten
(10) days after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
such termination, the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties or by a
binding and final arbitration award.

     

    8. Compensation upon
Termination or During Disability.

     

    (a) Accrued Obligation
Defined.  For purposes of this Agreement, payment of the “Accrued
Obligation” shall mean payment by the Company to the Executive (or his
designated beneficiary or legal representative, as applicable), when due, of all
vested benefits to which the Executive is entitled under the terms of the
employee benefit plans in which the Executive is a participant as of the Date of
Termination and a lump sum amount in cash equal to the sum of (i) the
Executive’s Base Salary through the Date of Termination, (ii) any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued Paid Time Off and (iii) any
other amounts due the Executive as of the Date of  Termination, in
each case to the extent not theretofore paid.

     

    (b) Disability;
Death.  Following the termination of the Executive’s employment
pursuant to Sections 6(a) or (b) hereof, the Company shall pay to the
Executive (or his designated beneficiary or legal representative, if
applicable):

     

    (i) the
Accrued Obligation,

     

    (ii) a lump
sum in cash equal to one-third of the Executive’s annual Base Salary as in
effect on the Date of Termination, and

     

    (iii) a lump
sum in cash equal to the Executive’s Annual Bonus, if any,  under the
Annual Incentive Plan for the fiscal year of the Company in which the


     

    
      
        
        

      

      
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      Date of
Termination occurs computed at the target rate as may be determined and approved
by the Compensation Committee for other Executive Vice Presidents of the Company
prorated to the Date of Termination.

    

     

    The
Company shall pay the Executive the amounts required pursuant to this
Section 8(b) no later than 60 days after the termination of the Executive’s
employment pursuant to Sections 6(a) or (b) hereof; provided, however, that
the   Annual Bonus, if any, to be paid to the Executive pursuant
to Section 8(b)(iii) hereof shall be paid at the time and in the manner in which
annual bonuses are paid to the other Executive Vice Presidents of the Company
under the Annual Incentive Plan as determined by the Compensation
Committee.

     

    (c) By the Company for
Cause.  If during the Term the Executive’s employment is
terminated by the Company pursuant to Section 6(c) hereof, the Company
shall pay to the Executive the Accrued Obligation within thirty (30) days
following the Date of Termination. Following such payment, the Company shall
have no further obligations to the Executive other than as may be required by
law or the terms of an employee benefit plan of the Company.

     

    (d) By the Executive Without Good
Reason.  If during the Term the Executive terminates his
employment for any reason other than Good Reason, the Company shall pay to the
Executive the Accrued Obligation within thirty (30) days following the Date of
Termination. Following such payment, the Company shall have no further
obligations to the Executive other than as may be required by law or the terms
of an employee benefit plan of the Company.  The Executive shall not
have breached this Agreement if he terminates his employment for any
reason.

     

    (e) By the Company Without Cause,
by the Executive for
Good Reason or In Connection With a Change In Control.  If
during the Term the Executive’s employment is terminated by the Company other
than for Cause, death or Disability, if the Executive terminates his employment
for Good Reason, or if the Executive’s employment is terminated “In Connection
With a Change of Control” (as defined below), then:

     

    (i) Within
thirty (30) days after the Date of Termination the Company shall pay the
Executive the Accrued Obligation.

     

    (ii) Subject
to clause (ix), within sixty (60) days
after the Date of Termination the Company shall also pay to the Executive a lump
sum cash severance payment in an amount equal to his Base Salary (at the rate in
effect as of the Date of Termination).

     

    (iii) In the
case of a termination of the Executive’s employment other than for Cause or if
the Executive terminates his employment for Good Reason, subject to clause (ix),
the Company shall also pay to the Executive a lump sum in cash equal to the
Executive’s Annual Bonus, if any, under the Annual Incentive Plan for the fiscal
year of the Company in which the Date of Termination occurs computed at the
target rate as may be determined and approved by the 

     

    
      
        
        

      

      
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      Compensation
Committee for the other Executive Vice Presidents of the Company (such amount,
if any, to be paid to the Executive at the time and in the manner in which
annual bonuses are paid to the other executives of the Company under the Annual
Incentive Plan as determined by the Compensation Committee).

    

     

    (iv) In the
case of a termination of the Executive’s employment in Connection With a Change
of Control, subject to clause (ix), within
sixty (60) days after the Date of Termination, the Company shall also pay to the
Executive a lump sum in cash equal to the expected value of the Executive’s
bonus opportunity under the Annual Incentive Plan for the fiscal year of the
Company in which the Date of Termination occurs prorated to the Date of
Termination.  Such payment is an accelerated payment of the bonus for
the fiscal year in which the Date of Termination occurs and is in lieu of all
other bonus payments that would have otherwise been due to the Executive under
the Annual Incentive Plan after the completion of the fiscal year.

     

    (v) For a
period of up to one (1) year from the Date of Termination, the Company shall
arrange to provide the Executive and his dependents medical insurance benefits
substantially similar to those provided to the Executive and his dependents
immediately prior to the Date of Termination (at no greater cost  to
the Executive than such cost to the Executive in effect immediately prior to the
Date of Termination, or, if greater, the cost to similarly situated active
employees of the Company under the applicable group health plan of the
Company).

     

    (vi) Subject
to clause (ix), no later than 60 days
after the Date of Termination the Company shall pay the Executive an amount
equivalent to the product of (1) the monthly basic life insurance premium
applicable to the Executive’s basic life insurance coverage immediately prior to
the Date of Termination and (2) twelve (12).  The Executive may,
at his option, convert his basic life insurance coverage to an individual policy
after the Date of Termination by completing the forms required by the Company
for this purpose.

     

    (vii) For a
period of up to one (1) year from the Date of Termination, the Company shall
continue to provide the Executive perquisites, other than executive life
insurance, in the manner specified in Section 4(e).  Subject to
clause (ix), these amounts shall be
paid on the first of each month following the month in which such amounts should
have otherwise been paid.

     

    (viii) Subject
to the Executive’s group health plan coverage continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, the benefits
and perquisites listed in clauses (v) of this Section 8(e) shall be
reduced to the extent benefits and perquisites of the same type are received by
or made available to the Executive during such period, and provided, further,
that the Executive shall have the obligation to notify the Company that he is
entitled to or receiving such benefits and perquisites.  Except with
respect to the benefits provided pursuant to clause (v), the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any
compensation earned 

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

       

      by the
Executive as the result of employment by another employer, or by retirement
benefits. Payments to the Executive under this Section 8 (other than
Accrued Obligations) are contingent upon the Executive’s execution of a release
substantially in the form of Exhibit A
hereto.

    

     

    (ix) If the Board (or
its delegate) determines in its sole discretion that as of the date of the
Executive’s termination the Executive is a “specified employee” (as defined in
Section 409A(a)(2)(B)(i) of the Code, and Department of Treasury
regulations and other interpretive guidance issued thereunder) as of the date of
the Executive’s termination and that any
payment due under clauses (ii), (iii) or (iv) during the six-month period that commences on and
follows the Executive’s Date of Termination must be delayed to comply with
Section 409A of the Code, then such
payment(s) shall be paid in one lump sum
amount on the first business day following
the six-month anniversary of the date of the Executive’s Date of Termination.

     

    (f) “In Connection With a Change of
Control” defined.   For purposes of this Agreement, a
termination “In Connection
With a Change of Control” shall mean the termination of the Executive’s
employment by the Company or its successor, as the case may be, for any reason
other than for Cause, death or Disability upon, in connection with, or within
180 days following, a “Change In Control of the Company” (as defined
below).  For purposes of this Agreement, a “Change in Control
of the Company” shall mean the occurrence of any of the following after
the Effective Date:

     

    (i) The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended from time to time, (the “Exchange
Act”) (a “Covered
Person”) of beneficial ownership (within the meaning of rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of the common stock of Rex (the “Outstanding
Company Common Stock”), or (ii) the combined voting power of the
then outstanding voting securities of Rex entitled to vote generally in the
election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of
this subsection (i) of this Section 8(f), the following acquisitions
shall not constitute a Change in Control of Rex: (1) any acquisition
directly from Rex, (2) any acquisition by Rex, (3) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by Rex or
any entity controlled by Rex, or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subsection (iii) of this Section 8(f); or

     

    (ii) Individuals
who, as of the Effective Date, constitute the Board of Rex (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board of Rex;
provided, however, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by Rex’s shareholders, was approved by a vote of at
least two-thirds of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this 

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

       

      purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Covered Person other than the Board of Rex;
or

    

     

    (iii) Consummation
of (xx) a reorganization, merger or consolidation or sale of Rex, or
(yy) a disposition of all or substantially all of the assets of Rex (a
“Business
Combination”), in each case, unless, following such Business Combination,
(1) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, direct or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Rex or all or
substantially all of Rex’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (2) no
Covered Person (excluding any employee benefit plan (or related trust) of Rex or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (3) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination.

     

    9. Confidential Information;
Non-Competition; Non-Solicitation.

     

    (a) Confidential
Information.  The Executive shall hold in a fiduciary capacity
for the benefit of the Company and Rex all trade secrets, confidential
information, and knowledge or data relating to the Company, Rex or their
subsidiaries and their businesses, which shall have been obtained by the
Executive during the Executive’s employment by the Company or Rex and which
shall not have been or hereafter become public knowledge (other than by acts by
the Executive or representatives of the Executive in violation of this
Agreement) (hereinafter being collectively referred to as “Confidential
Information”).  For the avoidance of doubt, Confidential
Information shall not include information that:

     

    (i) was
already in Executive’s possession prior to September 4, 2007; provided that the
information is not known by the Executive to be subject to 

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

       

      another
confidentiality agreement with, or other obligation of secrecy to, the Company,
Rex or any of their subsidiaries,

    

     

    (ii) becomes
generally available to the public other than as a result of a disclosure by the
Executive, or

     

    (iii) becomes
available to the Executive on a non-confidential basis from a source other than
the Company, Rex or any of their subsidiaries or any of their respective
directors, officers, employees, agents or advisors; provided, that such source
is not known by the Executive to be bound by a confidentiality agreement with or
other obligation of secrecy to the Company, Rex or any of their
subsidiaries.

     

    The
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
trade secrets, information, knowledge or data to anyone other than the Company,
Rex and those designated by the Company.  Any termination of the
Executive’s employment or of this Agreement shall have no effect on the
continuing operation of this Section 9(a).  The Executive agrees
to return all Confidential Information, including all photocopies, extracts and
summaries thereof, and any such information stored electronically on tapes,
computer disks or in any other manner to the Company at any time upon request by
the Company and upon the termination of his employment hereunder for any
reason.

     

    (b) Non-Competition. During the
Employment Period and for a period of one (1) year following the Date of
Termination, the Executive shall not, within the Restricted Territory, as
defined below, engage in Competition, as defined below, with the Company, Rex or
any of their subsidiaries; provided, that it shall not
be a violation of this Section 9(b) for the Executive to become the
registered or beneficial owner of up to five percent (5%) of any class of the
capital stock of a corporation registered under the Securities Exchange Act of
1934, as amended, provided that the Executive does not actively participate in
the business of such corporation until such time as this covenant
expires.  Notwithstanding the foregoing, the restrictions imposed by
this Section 9(b) shall not apply if the termination of the Executive’s
employment was by the Company without Cause or by the Executive with Good
Reason, or occurs by reason of expiration of the term of this Agreement (which
term includes any extension period pursuant to the operation of Section 11
hereof).

     

    (c) For
purposes of this Agreement, “Restricted
Territory” means
anywhere within a two (2) mile radius of any Area of Mutual Interest, oil or gas
producing property or mineral interest in which the Company, Rex or any of their
subsidiaries has an interest as of the Date of Termination.  “Competition”
by the Executive means the Executive’s engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or being a
director, officer, employee, principal, agent, stockholder, member, owner or
partner of, or permitting his name to be used in connection with the activities
of any other business or organization which competes, directly or indirectly,
with the business of the Company, Rex or their subsidiaries  as the
same shall be constituted at any time during the Term.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (d) Non-Solicitation. During the
Employment Period and for a period of one (1) year following the Date of
Termination, the Executive agrees that he will not, directly or indirectly, for
his benefit or for the benefit of any other person, firm or entity, do any of
the following:

     

    (i) solicit
from any customer doing business with the Company, Rex or their subsidiaries as
of the Date of Termination that is known to Executive, business of the same or
of a similar nature to the business of the Company, Rex or their subsidiaries
with such customer;

     

    (ii) solicit
from any potential customer of the Company, Rex or their subsidiaries that is
known to the Executive business of the same or of a similar nature to that which
has been the subject of a known written or oral bid, offer or proposal by the
Company, Rex or their subsidiaries, or of substantial preparation with a view to
making such a bid, proposal or offer, within six (6) months prior to such Date
of Termination;

     

    (iii) solicit
the employment or services of any person who was known to be employed by or was
a known consultant to the Company, Rex or their subsidiaries upon the Date of
Termination, or within six (6) months prior thereto; or

     

    (iv) otherwise
knowingly interfere with the business or accounts of the Company, Rex or their
subsidiaries.

     

    The
Executive and the Company agree and acknowledge that the Company has a
substantial and legitimate interest in protecting the Company’s, Rex’s and their
subsidiaries’ Confidential Information and goodwill. The Executive and the
Company further agree and acknowledge that the provisions of this Section 9
are reasonably necessary to protect the Company’s, Rex’s and their subsidiaries’
legitimate business interests and are designed to protect the Company’s, Rex’s
and their subsidiaries’ Confidential Information and goodwill.

     

    The
Executive agrees that the scope of the restrictions as to time, geographic area,
and scope of activity in this Section 9 are reasonably necessary for the
protection of the Company’s, Rex’s and their subsidiaries’ legitimate business
interests and are not oppressive or injurious to the public
interest.  The Executive agrees that in the event of a breach or
threatened breach of any of the provisions of this Section 9 the Company
shall be entitled to injunctive relief against the Executive’s activities to the
extent allowed by law, and the Executive waives any requirement for the posting
of any bond by the Company in connection with such action. The Executive further
agrees that any breach or threatened breach of any of the provisions of Section
9(a) would cause injury to the Company for which monetary damages alone would
not be a sufficient remedy.

     

    10. Indemnification;
Insurance.  The Company and/or Rex shall indemnify the
Executive to the fullest extent permitted by the laws of the Company’s state of
incorporation in effect at that time, or certificate of incorporation and
by-laws of the Company, whichever affords 

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

       

      the
greater protection to the Executive.  The Executive will be entitled
to any insurance policies the Company or Rex may elect to maintain generally for
the benefit of their respective officers and directors against all costs,
charges and expenses incurred in connection with any action, suit or proceeding
to which he may be made a party by reason of being a director or officer of the
Company, Rex or their subsidiaries.

    

     

    11. Successors; Binding
Agreement.

     

    (a) Company’s
Successors.  The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.  Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as he would be entitled to hereunder if
he terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.  As used in this
Agreement, “Company”
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 11 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.

     

    (b) Executive’s
Successors.  This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts unless otherwise provided herein shall be paid in accordance with
the terms of this Agreement to the Executive’s devisee, legatee or other
designee or, if there is no such designee, to the Executive’s
estate.

     

    12. Notice.  For
the purposes of this Agreement, notices, demands and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or (unless otherwise specified) mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:

     

    
      	
               
      

            	
              If
      to the Executive:

            


    

     

    


     

    
      	
               
      

            	
              William
      L. Ottaviani

            


    

     

    
      	
               
      

            	
              [address]

            


    

     

    If to the
Company:

     

    


     

    Rex
Energy Operating Corp.

     

    Attention:  General
Counsel

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    476
Rolling Ridge Drive, Suite 300

     

    State
College, Pennsylvania 16803

     

    or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

     

    13. Amendment or Modification;
Waiver.  No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
specifically designated by the Board or its Compensation
Committee.  No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in Agreement.

     

    14. Dispute
Resolution.  Any dispute or controversy arising under or in
connection with this Agreement, the Executive’s employment by the Company or the
Executive’s compensation or benefits (a “Dispute”)
shall be settled in accordance with the procedures described in this
Section 14.

     

    (a) First,
the parties shall attempt in good faith to resolve any Dispute promptly by
negotiations between the Executive and executives or directors of the Company
who have authority to settle the Dispute.  Either party may give the
other disputing party written notice of any Dispute not resolved in the normal
course of business.  Within five days after the effective date of that
notice, the Executive and such executives or directors of the Company shall
agree upon a mutually acceptable time and place to meet and shall meet at that
time and place, and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the
Dispute.  The first of those meetings shall take place within 30 days
of the effective date of the disputing party’s notice.  If the Dispute
has not been resolved within 60 days of the disputing party’s notice, or if the
parties fail to agree on a time and place for an initial meeting within five
days of that notice, either party may initiate mediation and arbitration of the
Dispute as provided hereinafter.  If a negotiator intends to be
accompanied at a meeting by an attorney, the other negotiators shall be given at
least three business days’ notice of that intention and may also be accompanied
by an attorney.  All negotiations pursuant to this Section 14
shall be treated as compromise and settlement negotiations for the purposes of
applicable rules of evidence and procedure.

     

    (b) Second,
if the Dispute is not resolved through negotiation as provided in
Section 14(a), either disputing party may require the other to submit to
non-binding mediation with the assistance of a neutral, unaffiliated
mediator.  If the parties encounter difficulty in agreeing upon a
neutral, they shall seek the assistance of the American Arbitration Association
in the selection process.

     

    (c) Any
Dispute that has not been resolved by the non-binding procedures provided in
Sections 14(a) and 14(b) within 90 days of the initiation of the first of


     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

       

      the
procedures shall be finally settled by arbitration conducted expeditiously in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association or of such similar organization as the parties hereto may mutually
agree; provided, that if one party has requested the other to participate in a
non-binding procedure and the other has failed to participate within 30 days of
the written request, the requesting party may initiate arbitration before the
expiration of the period.  The arbitration shall be conducted by three
independent and impartial arbitrators.  Executive shall appoint one
arbitrator, the Company shall appoint a second arbitrator, and a third
arbitrator not appointed by the parties shall be appointed by the first two
arbitrators selected.  The arbitration shall be held in Centre County,
Pennsylvania.  Judgment may be entered on the arbitrator’s award in
any court having jurisdiction.  The arbitrators shall award the
prevailing party in the arbitration its costs and expenses, including reasonable
attorney’s fees, incurred in connection with the Dispute.  The
arbitrators shall not award any amount to either the Executive or the Company in
excess of the compensation, employee benefits and indemnification amounts that
the Company paid or should have paid to the Executive pursuant to this
Agreement.

    

     

    (d) Notwithstanding
the Dispute resolution provisions of this Section 14, either party may
bring an action in a court of competent jurisdiction in an effort to enforce the
provisions of this Section 14 and to seek injunctive relief to protect the
party’s rights pending resolution of a Dispute pursuant to this Section 14,
including, without limitation, the Company’s rights pursuant to Section 9
of this Agreement.

     

    (e) Each
party shall pay all of their respective costs and expenses (including, but not
limited to, reasonable attorneys’ fees, the fees of the arbitrators and any
other related costs) for any arbitration proceeding or legal action initiated
under this Section 14; provided, however, that if in any such arbitration
proceeding or legal action, the arbitrator or court, respectively, determines
that either the Executive or the Company, as the case may be, has prosecuted or
defended any issue in such proceeding or action in bad faith, the arbitrator or
court, respectively, may allocate the portion of such costs and expenses
relating to such issue between the parties in any other manner deemed fair,
equitable and reasonable by the arbitrator or court, respectively.

     

    15. Governing
Law.  The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania without regard to its conflicts of law principles.

     

    16. Miscellaneous.  All
references to sections of any statute shall be deemed also to refer to any
successor provisions to such sections.  The obligations of the parties
under Sections 8, 9, 10, 14 and 19 hereof shall survive the expiration of
the Term.  The compensation and benefits payable to the Executive or
his beneficiary under Section 8 of this Agreement shall be in lieu of any
other severance benefits to which the Executive may otherwise be entitled upon
his termination of employment under any severance plan, program, policy or
arrangement of the Company.

     

    17. Severability.  The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this


     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

       

      Agreement,
which shall remain in full force and effect throughout the Term. Should any one
or more of the provisions of this Agreement be held to be excessive or
unreasonable as to duration, geographical scope or activity, then that provision
shall be construed by limiting and reducing it so as to be reasonable and
enforceable to the extent compatible with the applicable law.

    

     

    18. Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together will constitute one and the
same instrument.

     

    19. Release.  In
consideration of the benefits and compensation which may be awarded to the
Executive pursuant to Section 8 of this Agreement, the Executive hereby
agrees to execute and be bound by, as a condition precedent to receiving said
benefits and compensation, the Release attached hereto as Exhibit A, such
Release being incorporated herein by reference.

     

    20. Deferred Compensation;
Additional Payments.

     

    (a) This
Agreement is intended to meet the requirements of Section 409A of the Code
and shall be administered, construed and interpreted in accordance with such
intent.  To the extent that an award or payment, or the settlement or
deferral thereof, is subject to Section 409A of the Code, except as the
Board and Executive otherwise determine in writing, the award shall be granted,
paid, settled or deferred in a manner that will meet the requirements of
Section 409A of the Code, including regulations or other guidance issued
with respect thereto, such that the grant, payment, settlement or deferral shall
not be subject to the additional tax applicable under Section 409A of the
Code.  In the event additional regulations or other guidance is issued
under Section 409A of the Code or a court of competent jurisdiction provides
additional authority concerning the application of Section 409A with respect to
the payments described hereunder, then the provisions regarding such payments
shall be amended to permit such payments to be made at the earliest time allowed
under such additional regulations, guidance or authority that is practicable and
achieves the original intent of this Agreement.

     

    (b) Notwithstanding
anything in this Agreement or any other agreement to the contrary, in the event
it is determined that any payments or distributions (including, without
limitation, the vesting of an option or other non-cash benefit or property or
the forgiveness of any indebtedness) by the Company or any affiliate (as defined
under the Securities Act of 1933, as amended, and the regulations thereunder)
thereof or any other person to or for the benefit of the Executive, whether paid
or payable pursuant to the terms of this Agreement, or pursuant to any other
agreement or arrangement with the Company or any such affiliate (“Payments”),
would be subject to the excise tax imposed by Section 4999 of the Code, or any
successor provision, or any interest or penalties with respect to the excise tax
(the excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the “Excise
Tax”), then the Executive will be entitled to receive an additional
payment from the Company (a “Gross-Up
Payment”) in an amount that after payment by the Executive of all taxes
(including, without limitation, any interest or penalties imposed with respect
to such taxes and any Excise Tax) imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment 

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

       

      equal to
the Excise Tax imposed upon the Payments.  The amount of the Gross-Up
Payment will be calculated by the Company’s independent accounting firm, engaged
immediately prior to the event that triggered the payment, in consultation with
the Company’s outside legal counsel.  For purposes of making the
calculations required by this Section, the accounting firm may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code, provided that the accounting firm’s determinations
must be made with substantial authority (within the meaning of Section 6662 of
the Code).  The Gross-Up Payment will be paid on the Executive’s last
day of employment or on the occurrence of the event that results in the
imposition of the Excise Tax, if later.  If the precise amount of the
Gross-Up Payment cannot be determined on the date it is to be paid, an amount
equal to the best estimate of the Gross-Up Payment will be made on that date
and, within 10 days after the precise calculation is obtained, either the
Company will pay any additional amount to the Executive or the Executive will
pay any excess amount to the Company, as the case may be.  If
subsequently the Internal Revenue Service (the “IRS”)
claims that any additional Excise Tax is owing, an additional Gross-Up Payment
will be paid to the Executive within 30 days of the Executive providing
substantiation of the claim made by the IRS.  After payment to the
Executive of the Gross-Up Payment, the Executive will provide to the Company any
information reasonably requested by the Company relating to the Excise Tax, the
Executive will take those actions as the Company reasonable requests to contest
the Excise Tax, cooperate in good faith with the Company to effectively contest
the Excise Tax and permit the Company to participate in any proceedings
contesting the Excise Tax.  The Company will bear and pay directly all
costs and expenses (including any interest or penalties on the Excise Tax), and
indemnify and hold the Executive harmless, on an after-tax basis, from all such
costs and expenses related to such contest.  Should it ultimately be
determined that any amount of an Excise Tax is not properly owed, the Executive
will refund to the Company the related amount of the Gross-Up
Payment.  Notwithstanding anything in this Section to the contrary,
all Gross-Up Payments due under this Section shall be made prior to the end of
the Executive’s taxable year following the year in which the related taxes are
remitted to the taxing authority.

    

     

    21. Entire
Agreement.  This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and, as of
the Effective Date and except as provided in Section 1(a), supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto.

     


    
      
         


      

      
        -20-

        
          

        

      

      
         


      

    


    


     

    IN WITNESS WHEREOF, the
parties have executed this Agreement on the date first above
written.

     

    
      	 
      	
              Rex
      Energy Operating Corp. (the “Company”

            
	 
      	 
      
	 
      	
              By:       /s/
      Benjamin W. Hulburt

            
	 
      	
              Name:  Benjamin
      W. Hulburt

            
	 
      	
              Title:  President
      and Chief Executive Officer

            
	 
      	 
      
	 
      	 
      
	 
      	
              William
      L. Ottaviani (the “Executive”)

            
	 
      	 
      
	 
      	 
      
	 
      	
                 /s/   William
      L. Ottaviani

            
	 
      	 
      


    

    



    
      
         


      

      
        -21-

        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    RELEASE

     

    The
Executive hereby irrevocably and unconditionally releases, acquits and forever
discharges the Company (as defined in the Executive’s Employment Agreement) and
its affiliated companies, including, without limitation, Rex (as defined in the
Executive’s Employment Agreement), and their directors, officers, employees and
representatives, (collectively “Releasees”),
from any and all claims, liabilities, obligations, damages, causes of action,
demands, costs, losses and/or expenses (including attorneys’ fees) of any nature
whatsoever, whether known or unknown, including, but not limited to, rights
arising out of alleged violations of any contracts, express or implied, any
covenant of good faith and fair dealing, express or implied, or any tort, or any
legal restrictions on the Company’s right to terminate employees, or any
federal, state or other governmental statute, regulation, or ordinance,
including, without limitation, Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act of 1967, as amended, the
Pennsylvania Human Relations Act, as amended, and the Pennsylvania Wage Payment
and Collection Law, which the Executive claims to have against any of the
Releasees (in each case, except as to indemnification provided by (a) the
Executive’s Employment Agreement with the Company (as amended or superseded from
time to time) and/or (b) by the Company’s bylaws and any indemnification
agreement or arrangement permitted by Section 145 of the Delaware General
Corporation Law and by directors, officers and other liability insurance
coverage’s to the extent you would have enjoyed such coverages had you remained
a director or officer of the Company).  In addition, the Executive
waives all rights and benefits afforded by any state laws which provide in
substance that a general release does not extend to claims which a person does
not know or suspect to exist in his favor at the time of executing the release
which, if known by him, must have materially affected the Executive’s settlement
with the other person.  The only exception to the foregoing are claims
and rights that may arise after the date of execution of this Release, claims
and rights arising under any employee benefit plan (including, but not limited
to the Long Term Incentive Plan and the Annual Incentive Plan) and claims and
rights arising under Section 8 of the Executive’s Employment
Agreement.

     

    The
Executive understands and agrees that:

     

    
      	
               
      

            	
              A.

            	
              He
      has a period of 21 days within which to consider whether he desires to
      execute this Agreement, that no one hurried him into executing this
      Agreement during that 21-day period, and that no one coerced him into
      executing this Agreement.

            


    

     

    
      	
               
      

            	
              B.

            	
              He
      has carefully read and fully understands all of the provisions of this
      Agreement, and declares that the Agreement is written in a manner that he
      fully understands.

            


    

     

    
      	
               
      

            	
              C.

            	
              He
      is, through this Agreement, releasing the Releasees from any and all
      claims he may have against the Releasees, and that this Agreement
      constitutes a release and discharge of claims arising under the Age
      Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§
      621-634, including the Older Workers’ Benefit Protection Act, 29 U.S.C. §
      626(f).

            


    

     

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              D.

            	
              He
      declares that his agreement to all of the terms set forth in this Release
      is knowing and is voluntary.

            


    

     

    
      	
               
      

            	
              E.

            	
              He
      knowingly and voluntarily intends to be legally bound by the terms of this
      Release.

            


    

     

    
      	
               
      

            	
              F.

            	
              He
      was advised and hereby is advised in writing to consult with an attorney
      of his choice concerning the legal effect of this Release prior to
      executing this Release.

            


    

     

    
      	
               
      

            	
              G.

            	
              He
      understands that rights or claims that may arise after the date this
      Agreement is executed are not
waived.

            


    

     

    
      	
               
      

            	
              H.

            	
              He
      understands that, in connection with the release of any claim of age
      discrimination, he has a period of seven days to revoke his acceptance of
      this Release, and that he may deliver notification of revocation by letter
      or facsimile addressed to the General Counsel of the Company, at
      _____________, or (___) -___.____.  Executive understands that
      this Agreement will not become effective and binding with respect to a
      claim of age discrimination until after the expiration of the revocation
      period.  The revocation period commences when Executive executes
      this Agreement and ends at 11:59 p.m. on the seventh calendar day after
      execution, not counting the date on which Executive executes this
      Agreement.  Executive understands that if he does not deliver a
      notice of revocation before the end of the seven-day period described
      above, that this Agreement will become a final, binding and enforceable
      release of any claim of age discrimination.  This right of
      revocation shall not affect the release of any claim other than a claim of
      age discrimination arising under federal
law.

            


    

     

    
      	
               
      

            	
              I.

            	
              He
      understands that nothing in this Agreement shall be construed to prohibit
      Executive from filing a charge or complaint, including a challenge to the
      validity of this Agreement, with the Equal Employment Opportunity
      Commission or participating in any investigation or proceeding conducted
      by the Equal Employment Opportunity
Commission.

            


    

     

    AGREED AND ACCEPTED, on this
_____ day of ________________, _______.

     

    
      	 
      	
              William
      L. Ottaviani (“Executive”)

               

               

               

               

               

            


    

    


    



    
      
         


      

      
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